[twriter]

Hi all,


I am getting close to purchasing a Bolt. In doing my research, I found information that said that federal tax rebate was (a) a one-time offering and (b) "up to" $7500. IOW, for whatever you own in taxes, you can reduce that liability by $7500--or "up to" $7500, and that one time. One you use it, for whatever amount, it's done. Is my understanding correct?


If so, they my impetus to make a purchase before the credit runs out for the Bolt, which I expect to happen "soon" (whenever that might be), seems to suggest that an end-of-year purchase is sub-optimal. There's just no way I could adjust my withholding at this late date to maximize my credit. (I typically have my federal withholding such that I either get back a few dollars or own a few dollars, either way as small as possible.) I'm thinking my best course of action would be to make the purchase right at the first of the year, then adjust my withholding for 2019 so I can claim the maximum credit for that tax year. Am I thinking about this correctly, or am I totally missing the point?

 

[Orlyi]

I'm no CPA, but I'm pretty sure your Liability is not offset by your withholding.

Example: if in 2018 you owed $7500 in Federal taxes and withheld 0$ throughout the year you would owe 0$ with the tax credit. If you withheld $7500 throughout the year you would get a $7500 refund.

Again... not a tax expert and I haven't dealt with my EV credit (yet)

 

[DaV8or]

You can still get full benefit from the credit if you buy this year. Your withholdings don't matter. So let's say you withheld nothing and owe $10,000 in taxes come April 15th. You would only have to pay $2500. If you over withheld and would be getting a $2500 refund, you would now get a $10,000 refund. If you nailed it perfectly and didn't owe anything, but also weren't getting a refund, you would then get a $7500 refund.

If you prefer to adjust your withholdings for next year so you can have more money in your pocket each month, that's OK too. Just buy the car next quarter. GM says they are likely to trigger the beginning of the phase out this quarter, but that's OK because the next two quarters (2019 Q1 and Q2) still get the full $7500. It's 2019 Q3 where it will then reduce to $3750.

The big consideration is, what will congress do? The GOP seems to hate the credit and they have introduced legislation to kill it. If it passes and it easily could, it will likely kill the credit for 2019, but not 2018. I say likely , but even that is not certain. They could pass it to apply to 2018 as well. IMO, if the tax credit is important to you, buy sooner rather than later because of the chaos in the capitol.

 

[ZoomZoom]

It's a tax credit, not a rebate. It's handled completely differently in how it translates to your total tax liability. As many have pointed out, you need to fully understand your tax position to be able to answer if that actually means you will be $7500 richer when you file. Clearly, until you work the numbers you won't know your position, yet. And, there are some that offload their taxes to 3rd parties so those people may or may not need to consult with that 3rd party to know.

The good news is the Bolt still gets the full credit amount.

 

[XJ12]

you have to have that much liability. Independent of your withholdings. If you buy this year, but normally get none back due to your withholdings, then you'll get a 7500 return next year at tax time. You have to pay full amount for car. If you buy next year, you could adjust your withholding to under pay so you can get the 7500 back during the year and in 2020 get no lump sum at tax time. But don't forget to change your withholding back to the original amount.

hope that makes sense.

 

[TimBolt]

If you can’t take advantage of the full $7500 tax credit because you don’t pay that much in federal income tax there’s always the leasing option.

How much of the tax credit is included in the lease deal may be fairly opaque, GM Financial doesn’t spell it out, but it’s usually reflected in a higher lease residual value, which lowers the lease payment. Not sure if there are any good lease deals out there now that interest rates are climbing again, but it’s worth considering if your federal income tax owed for 2028 will be substantially less than $7500.

That’s the reason I leased last year, as I had no federal tax liability.

 

[rscarce]

Regarding the OP's question about withholding: yep, an early-January purchase, and a conversation with your HR folks at work to adjust your W-4 withholding, will result in you getting a $600+/month "raise" if you qualify for the full credit.

Also, Orlyi is correct. In my case, I will be buying a Bolt this year and was confused and concerned enough about how the credit works that I actually went into the draft 2018 IRS 1040 form and used our income, taxes withheld, and so on from last year to run the numbers (the idiotic "dream" of a postcard-sized 1040 is now with us, but I'll save my rant about this awful tax cut for the rich). We're a middle-class family with two incomes and lots withheld in federal taxes, and the math worked out just fine. If your tax liability (the amount from the tax table that you owe, given your taxable income--NOT the amount that was withheld) is $7,500 or more, you get the full $7,500 credit if you buy before the credit gets reduced (likely Q3 next year, it looks like). Orlyi's example is spot-on.

 

[twriter]

much appreciate the detailed and rapid replied. I don't know what I was thinking, but yeah, my brain was stuck on what I might have to pay over my withheld tax liability, not the total tax liability itself. This makes so much more sense. And really, I want to get into a Bolt sooner, rather than later (as much as I would sorely miss top-down driving in my MINI Roadster), so this clear a hurdle in my mind, one that I erected myself.

 

[SparkE]

If you can’t take advantage of the full $7500 tax credit because you don’t pay that much in federal income tax there’s always the leasing option.

Also, *maybe* you can move money around and "create" extra income for 2018 - but talk to a tax professional.

For example, you can create "income" by moving money from a "traditional" IRA into a "Roth" IRA. If you have $40K in a traditional IRA, you could move just enough into a Roth IRA so that you would have (say) $7550 in total tax liability for the year from all sources - basically moving some of your retirement money into a completely tax-free area that the tax credit 'pays' for. (If, of course, you were planning on buying a Bolt anyways.)

For example, maybe your total tax liability for the year is $5000. You move enough out of your IRA into a Roth account to generate $2500 in extra taxes. You end up not paying any taxes, and move money out of a tax-deferred retirement account into no-tax retirement funds.

Or, maybe you bought Apple or Google stock (or any stock with unrealized capital gains). Since it is a tax credit, you could sell enough stock to bring your taxes up to just over $7500. Again, IF you were planning on selling the stock soon anyways, it's a viable option ...

REMEMBER - talk to a tax professional.

 

[California]

There are some issues not clearly distinguished here.

Think of the Tax Credit as the equivalent of someone else paying your tax obligation, so when you file your taxes you have overpaid and can get back the $7500 excess. (Or you could adjust your withholding down by $600+ per month to avoid that overpayment). If you aren't going to have a tax obligation of $7500 then all or part of the tax credit isn't available to you.

Withholding is (in theory) just sending in your taxes due weekly or monthly as you earn the income instead of waiting for the end of the year and paying all at once. (Waiting would also incur an underwithholding penalty).

And Itemizing Deductions in place of taking the Standard Deduction isn't relevant to this EV tax credit since the credit isn't a Deduction (a reduction of taxable income) like your mortgage interest expense, your child, etc - all of which reduce Gross income to define your Taxable income. Taking the Standard Deduction won't affect your eligibility for the EV Tax Credit.

 

[California]

Kinda related - a common fraud is someone filing taxes in your name, and claiming a tax refund due to you based on over-withholding.
I intentionally under-withhold, just short of the amount that would cause an underwithholding penalty. Then include the amount due when I file my taxes. If someone were to claim an overwithholding refund in my name - that's not my money at risk while it gets sorted out.

 

[GregBrew]

Kinda related - a common fraud is someone filing taxes in your name, and claiming a tax refund due to you based on over-withholding.
I intentionally under-withhold, just short of the amount that would cause an underwithholding penalty. Then include the amount due when I file my taxes. If someone were to claim an overwithholding refund in my name - that's not my money at risk while it gets sorted out.

I got a (real, legit) notice from the IRS a few years back, in March, that there were "problems" with my return for the previous tax year. All of the figures were wrong, nothing matched the 1099s, and it resulted in a large refund.


I hadn't yet filed my Federal taxes for the previous year.

 

[California]

Wow. They didn't actually mail someone 'your' refund check, did they?

 

[SparkE]

Yeah, that happened to a friend of mine as well. He got a phone call from the IRS saying his tax address was wrong, and that certain declarations were incorrect. He was, of course, rather doubtful getting a phone call from the IRS. But they claimed that the address on his return had been changed - was he SURE that he got the address correct on his return. He said "my tax return is sitting on my desk - I haven't mailed it yet". A few seconds of silence, then he heard "OK, I'm marking your return as having a problem, and we won't be mailing out your rebate check, and that we should expect a return from you soon..."

Someone had fraudulently filed a tax return for him and claimed a large rebate, to be sent to a new address. The fact that HE actually wasn't due a refund (he was supposed to write a check for about $100) didn't stop the con artist from filing a return that claimed thousands in overpayment. So the fact that YOU don't owe them money with the return doesn't stop somebody else from filing a fraudulent return that would result in a large repayment of estimated taxes already collected.

 

[GregBrew]

Wow. They didn't actually mail someone 'your' refund check, did they?

Yes...yes they did. I understand that the IRS operates under the "send the check, ask questions later" principle. If true, that's just plain stupid.

 

[GregBrew]

Yeah, that happened to a friend of mine as well. He got a phone call from the IRS saying his tax address was wrong, and that certain declarations were incorrect. He was, of course, rather doubtful getting a phone call from the IRS. But they claimed that the address on his return had been changed - was he SURE that he got the address correct on his return. He said "my tax return is sitting on my desk - I haven't mailed it yet". A few seconds of silence, then he heard "OK, I'm marking your return as having a problem, and we won't be mailing out your rebate check, and that we should expect a return from you soon..."

Someone had fraudulently filed a tax return for him and claimed a large rebate, to be sent to a new address. The fact that HE actually wasn't due a refund (he was supposed to write a check for about $100) didn't stop the con artist from filing a return that claimed thousands in overpayment. So the fact that YOU don't owe them money with the return doesn't stop somebody else from filing a fraudulent return that would result in a large repayment of estimated taxes already collected.

I would have asked for some identifying information about the agent, and a "case number (?)" that would direct the IRS to my particular issue. Then I would have hung up and called the IRS directly, myself.


This is the first case I have *ever* heard of the IRS "legitimately" contacting someone by telephone. Everything I've read says that someone contacting you by phone, text or e-mail, claiming to be the IRS is absolutely a scam, and the IRS ONLY contacts taxpayers by the USPS.


Color me "skeptical" about your story.

 

[California]

I've gotten phone calls like your friend but it may have been state tax folks, not federal. Their questions were to verify something on the return I had filed, something they wouldn't know if they didn't have my return in front of them. They didn't volunteer, or ask for, anything that would have been part of a scam. Just treat a phone call like that verrry carefully!

It may have been because I deducted payment to a contractor for work on my rentals and he didn't report that as income.




Added - an off-topic IRS story:
I renovated a five-unit rental, lots of receipts. My toss-receipts-in-a-box accounting was casual but sufficiently accurate. Two years later I got an IRS audit demand. 'Show us everything'. Two weeks of frantic organizing receipts by subject then running adding machine tapes to summarize each of the many stacks.

When I went to the interview the auditor keyed in and re-added everything I passed across the table, category by category. Everything supported what I had filed. Finally I asked the federal auditor "Ok, what was that all about."

She said I cashed out an IRA without reporting it which triggered an audit. I replied no, my credit union switched IRA trustees and lost the $10k I had in an IRA there. Last year I had a battle with them to restore my vanished IRA. If they reported it to IRS as a cash-out they never notified me. Now this! "Oh. Sorry. Just send us the paperwork where your credit union resolved that." Case closed. A few more gray hairs. No thanks to Golden1 C.U.

Your Tax Dollars At Work.

 

[SparkE]

I would have asked for some identifying information about the agent, and a "case number (?)" that would direct the IRS to my particular issue. Then I would have hung up and called the IRS directly, myself.


This is the first case I have *ever* heard of the IRS "legitimately" contacting someone by telephone. Everything I've read says that someone contacting you by phone, text or e-mail, claiming to be the IRS is absolutely a scam, and the IRS ONLY contacts taxpayers by the USPS.


Color me "skeptical" about your story.

He was also skeptical. But the only thing they asked him for was confirmation of change of address - they didn't ask for TaxID or (in fact) ANY info that would have been on his return. He didn't give them any info except "I haven't sent in my return yet - I can see it as it is sitting on my desk right now". At which point they basically said "OK, we won't mail out the refund check" and that was it.

 

[Raymondjram]

There is some worrying news about the $7,500 Federal tax credit:
http://gmauthority.com/blog/2018/10...tion-to-kill-federal-electric-car-tax-credit/

GM and Tesla have reached the maximum limit, and their buyers will only get half, or $3,500 for the next six months. If this bill passes, there will be no more tax credit for any EV producer. So follow this news and if any reader or family member is planning to get the tax credit, buy the Bolt EV now before all the credit is gone or eliminated.

I am not worried because I never pay Federal taxes so I never qualify for any tax credit.

 

[ZoomZoom]

I am not worried because I never pay Federal taxes so I never qualify for any tax credit.

You are my hero, I am down to 4% but that is as low as I can get it and that's after some interesting deductions that got me audited, and the interesting deductions survived the audit. Ironically, things I thought were 'good' deductions didn't.